Yesterday I went to an excellent conference organised by the Council of Mortgage Lenders. I know it was good because I came away with a headache and a slightly befuddled mind, but invigorated nevertheless.
What made it more interesting was that on the train into London I read Martin Wolf’s column in the Financial Times, which in retrospect provided a fitting overture to the day, despite the link in subject matter being a bit distant from the UK housing market.
His concerns were the world economy. There is no easy way of the mire, he suggests.
He identifies two alternatives as to what happens next: “success” and “failure”. Cheerily he argues that the results of “success” probably lead to a worse financial crisis.
But for all the gut-churning worry you might be left with after reading his piece there is, in his mind, a clear view of a way forward.
“Most people hope... that the world will go back to being the way it was. It will not and should not,” he says.
“The essential ingredient of a successful exit is, instead, to use the huge surpluses of the private sector to fund higher investment, both public and private, across the world.”
Now that must be a sweet sound to anyone who takes an interest in construction.
So what has this to do with the “Future housing conference” held by CML?
Well in essence the conference was concerned with what the future will, or might, look like and how might we get there.
Reassuringly, at least I felt reassured, there were no firm conclusions other than, in the mortgage market at least, the old normal wasn’t normal after all and the new normal will be very different, although probably more like the normal the mums and dads of homebuyers in the noughties knew than the normal experienced by homebuyers themselves in the noughties.
Certainly the days when lenders were prepared to provide long-term funding for homebuyers (based in many cases on flakey applications) on terms better than the short-term rates available to AAA-rated banks are probably gone for good – until the next bout of financial madness infects the system anyway.
Less reassuringly one was clearly left with the impression that the road we must travel to get to whatever the new normal might be is likely to be a hairy one potholed with large risks.
There was, however, one underlying common assumption: there is a shortage of housing. Unsurprisingly this was put most forcefully by John Stewart, director of economic affairs at the Home Builders Federation.
He suggested that the private sector was the likely, nay inevitable, force to drive increased house building, but its capacity to expand was constrained.
How we get to fund the buyers of these private homes also provides a rather tricky problem, as does the question of how we fund social housing.
The cross subsidies derived from a thriving profitable market sector that has supported much of the social sector house building in recent years can no longer be relied upon and direct funding from the public purse for social house building is clearly under great threat.
So the immediate outlook is pretty bleak.
But at least we recognise a need. That is a starting point. It is now down to the industry, both the builders and the funders, along with the state to find a solution.
For those who just want things to go back to the normal we experienced over the past decade or so the next few years will be uncomfortable and the years after will be a huge disappointment. We will not get back to that normality, nor should we.
Instead we have an interesting and exciting challenge: What do we want the new normal to look like and how might we build towards it? And we are not helpless in this.
If I can borrow the concluding paragraph to Martin Wolf’s piece as a beacon of light for those in construction: “Let us not repeat the past errors. Let us not hope that a credit-fuelled consumption binge will save us. Let us invest in the future, instead.”